Major carmakers are gradually moving their wire harness production to Central Europe, seeking to balance lower labor costs with an acceptable level of investment risk. Slovakia, a country that in the past hasn't seen much automotive industry investment, is now taking its fair share of this booming business.
Nitra-based Volkswagen Elektrické Systémy (VWES) has been revving up its wire harness production to keep up with increased demand for VW Group models. The company has moved from two-shift to three-shift production, and last month increased the number of employees from 1,330 to 1,500.
As daughter company of VW Bordnetze AG, which is a joint venture between German Volkswagen AG and Siemens AG, VWES was established in January 1996 and produced its first harnesses in June 1996. VWES's current production site is 40,000 square meters, of which production halls cover 14,510 square meters. But, according to the company's economic director, Hermann Krueder, this space will soon be too small.
The company's customers include VW Bratislava, Audi Hungary and Czech Škoda. Last month, VWES launched a new production mode, which called for the company to become the exclusive supplier of harnesses to VW Bratislava, and to install the devices using VWES employees who would work directly on the VW Bratislava assembly line.
VWES expects its 1998 turnover to reach 80 million Deutschmarks ($44 million), almost trebling the 1997 figure of 28.9 million D-marks.
Volkswagen is not the only carmaker that has found Central Europe a suitable location for producing wire harnesses. The region's low labor costs make it an attractive spot for such a labor-intensive production process.
"Wiring harness production has a very high labor content," said Leszek Waliszewski, Poland's Country Director at Delphi, which produces wiring systems in Poland, the Czech Republic, Hungary and Romania. "It has one of the highest labor contents in the automotive industry."
Since the investment required for establishing a wiring harness production facility is low, the risk involved in building a plant in a new market is more than acceptable. "Wiring harness production is quite flexible, and is capable of moving into unknown new markets," Waliszewski said.
Jeffrey A. Jones is Editor-in-chief of the Central Europe Automotive Report.
4. Jun 1998 at 0:00 | Jeffrey Jones